number 32 • Summer 2017

Authors

Josh Barro

articles

The stock-market crash and economic torpor of the past three years have finally forced many states to confront the severe underfunding of their public-employee pensions. But while such reform initiatives have been numerous, they have, for the most part, been ineffective. They have left untouched the fundamental problems plaguing state pensions — foremost among them the flaws inherent in the defined-benefit model. And yet the failure to enact meaningful reforms is not entirely the fault of the states. Many of the barriers to reform can be removed only by the federal government — which means Congress has a vital role to play in helping states restore their pension systems to stability.

The showdown in Wisconsin, the fights in Ohio and New Jersey, and much of the panic among budget-watchers in almost every other state capital can be traced to the same source: the pensions and benefits promised to public workers. How did the states arrive at this point? And what can lawmakers and public workers do to clean up the pensions mess? Only by getting politicians, voters, public workers, and unions to agree to sensible reforms can the states avoid fiscal disaster.